R.J.H.writes: I retired from BT after 40 years, always as a Pay As You Earn taxpayer. Last year, Revenue & Customs informed me I had underpaid tax of £3,977. Now on a limited income, I agreed to pay this over three years by instalments. This has caused some hardship but I thought I had no option. However, your recent article about a reader with a similar problem mentioned an Extra Statutory Concession that allows the Revenue to cancel tax, and this prompted me to write to the tax office, but I have just heard from officials who say it does not apply in my case.

Since the PAYE system was launched in 1944 we have all become used to relying on the Revenue to get its sums right.

If asked, we complete a tax return, but then we depend on Revenue staff to decide how much to collect from our pay or pension. This worked for decades without any serious problems.

Incompetence: The Revenue's HQ in London

Now though, it seems there are more problems than solutions. The Revenue has become incompetent thanks to a leadership that frankly couldn’t organise a celebration in a brewery.

You ran up huge tax debts because you were liable at the higher rate but tax was collected only at the basic rate. Whether the Revenue will write this off depends on whose fault it was. And the Revenue told you: ‘We have no record of any information sent by you or any third party which we failed to act on.’

This is extraordinary. Your tax arrears grew over three years, from 2007 to 2010. In all that time, did you conceal your income? And did BT fail to supply the Revenue with the usual end-of-year pay and tax details? No, of course not. As far back as February 2007, officials knew you were on an above-average income. They instructed BT to tax you at the basic rate, with no tax-free allowances at all.

This is unusual.

But having done this, did those same officials not check your tax at the end of each financial year? If they did, surely this means they did hold all the information they needed and they should now accept they failed to act on it?

Well no, not according to the Revenue. It told me: ‘We would have been notified about Mr H’s income at the end of the tax year, when the employer sent in annual returns, but these updates do not count as information under our Extra Statutory Concession.’

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Talk about having your cake and eating it. Employers are legally obliged to hand over this information, but it doesn’t really count as information.

The arrears date to when your BT pension began but you continued working for a while. The Revenue should have sent you a form to complete about your future income, but it admitted to me that it failed to do so.

Instead, staff simply assumed that you had given up work. They then made things worse early in 2011 by issuing an incorrect PAYE code for you.

Despite all these mistakes, the Revenue holds you responsible and not its own staff. It told me it was only fair to expect you and every other taxpayer to carry out checks on your PAYE code, your monthly payslips, and your annual tax certificate. It is then up to you to spot mistakes and tell the people who made them. Now for the tiny bit of good news.

The Revenue concedes it should have sent you a form to fill in when you reached retirement age. If it had done so, all the arrears could have been avoided. It failed to do so, and it wants to compensate you. The amount? Just £40, against tax debts of almost £4,000.

One day MPs will wake up to just how bad the Revenue has become. Meanwhile, complain to the outside Revenue Adjudicator, the Whitehall referee who investigates complaints from the public. Better allow time for a reply – she may be rushed off her feet.

CD that’s big hit with fraudsters

K.W.writes: I have received paperwork through the post headed: ‘Industry and Commerce, Register of Business Information’. I have no knowledge of the company behind this. I run a small firm and do not advertise, and I am worried I have been targeted by some type of scam.

The paperwork you received says your business is already on a database and at first sight you are just being asked to confirm the details.You are told: ‘If any details are not fully correct, please update these without any cost.’But there is a sting buried further down the form. If you sign it and return it, you are also ordering a computer disc that will include your firm along with thousands of others. Your entry will appear each year for three years, at an annual cost to you of 997 euros (about £800).Although the form was sent from Middlesex, it really comes from a company called the European City Guide, which is based in Valencia.Whether your local car repair business in the North of England would gain any work by appearing on a CD that may be taken seriously only by other people who have also paid 997 euros is questionable. And the European City Guide itself is highly questionable. In 2003, after an international investigation led by our own Office of Fair Trading, its publishers were fined £200,000 by a court in Barcelona for tricking 3,500 small businesses into paying thousands of pounds for pointless directory entries. You are right to give this a miss.

Nationwide’s £200 ‘conjuring trick’

D.M.writes: Nationwide Building Society has taken £200 from my credit card account. The money should have been transferred to my wife’s account but it disappeared.

Trying to track down your money has been like watching a conjuror shuffle three upturned cups, one with your £200 underneath it.

You even thought you had paid twice, when in fact it was the same money zipping round and round between accounts. You intended to pay £200 into your wife’s card account, but it was credited to your own card. A week later you tried again to transfer it, but the £200 stayed in your account. Then a month or so after that, the £200 finally moved to your wife’s account.Nationwide accepts its slip-up and says: ‘We will be writing to Mr M to apologise and will credit his account with £75 as a gesture of goodwill.’

We're watching you

Corrupt stockbroker Jay Alan Rutland has been fined £30,000 and banned from the industry for life by the City regulator.

Rutland, 31, was a senior broker at Pacific Continental Securities,
condemned by Financial Mail as Britain’s riskiest broking firm. It was
closed down in 2007 after our lengthy investigation exposed massive
corruption and mis-selling.

Compensation claims from investors who were cheated totalled almost £50million.

The Financial Services Authority found that Rutland had ‘watered down’
risk warnings that should have been given to clients by junior staff. He
had also improperly used inside information to boost share sales. In
the year before Pacific collapsed, he earned nearly £500,000.

The FSA tried to ban him in 2010, but he lodged an appeal he has only
just withdrawn. Revealing details of the case, the FSA said he had shown
‘a lack of honesty and integrity’.